Selecting Financial Strategies

Definitions from Chapter 5 of the AQA A2 business textbook

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Trading Profit: The difference between the income received from an organisation's normal activities and the expenditure it incurs in operating.

Retained Profit: The part of a firm's profit that is reinvested in the business rather than distributed to shareholders.

Asset: Any item owned by the firm

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External Sources of Finance

Ordinary Share Capital: Money given to a company by share-holders in return for a share certificate that gives them part ownership of the company and entitles them to a share of the profits.

Loan Capital: Money received by an organisation in return for the organisation's agreement to pay interest during the period of the loan and repay the loan within an agreed time.

Debenture: A long-term loan made to a business at an agreed fixed rate of interest and repayable on a stated date.

Bank Loan: A sum of money provided to a firm or individual by a bank for a specific, agreed purpose.

Bank Overdraft: When a bank allows an individual or organisation to overspend it's current account in the bank up to an agreed (overdraft) limit and for a stated time period.

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Profit Centre

Profit Centre: An identifiable part of an organisation (e.g. a department, a product or a branch) for which costs and revenue (and thus profit) can be calculated.

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